IMFhttp://www.businessinsider.com/category/imf
en-usTue, 31 Mar 2015 17:34:28 -0400Tue, 31 Mar 2015 17:34:28 -0400The latest news on IMF from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://uk.businessinsider.com/russia-is-digging-in-its-heels-on-its-3-billion-loan-to-ukraine-2015-3Russia is refusing to negotiate over its $3 billion loan to Ukrainehttp://uk.businessinsider.com/russia-is-digging-in-its-heels-on-its-3-billion-loan-to-ukraine-2015-3
Sun, 29 Mar 2015 13:40:00 -0400Tomas Hirst
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5515761fdd0895f30f8b463e-1200-924/putin-32.jpg" border="0" alt="putin"></p><p>Russia will not negotiate delaying repayment over its $3 billion (£2 billion) loan to Ukraine that is due in December.</p>
<p>Failure to agree on a restructuring of the debt could result in the Ukrainian government being unable to meet the conditions of its latest bailout package agreed with the International Monetary Fund. The agreement requires Ukraine to restructure at least $5.2 billion worth of its debt in 2015.</p>
<p>As <a href="http://uk.businessinsider.com/ukraines-debt-rescue-plan-is-in-trouble-2015-3">AFP reported this morning</a>,&nbsp;IMF spokesman William Murray told the press that "if<span style="line-height: 1.5em;">&nbsp;I'm not mistaken, the $3 billion Eurobond comes from the Russian sovereign wealth fund, so it's official debt". Under IMF rules, it is unable to lend to countries that have defaulted on "official debt" meaning any attempt by the authorities in Kiev to force restructuring on Russia could threaten its $17.5 billion rescue package.</span></p>
<p>Earier today Russian <a href="http://www.interfax.ru/432630">finance minister Anton Siluanov confirmed that the Russian loan would indeed be classified as "official debt"</a> and said that the country was still not ready to restructure the debt "because [Russia] itself is in a difficult situation."</p>
<p>Unfortunately, the Russian loan accounts for a huge chunk of the debt repayments owed by Ukraine this year meaning that its options to find cuts elsewhere are limited:</p>
<p><img src="http://static3.businessinsider.com/image/54b8d97feab8ea4018e04593-663-467/tomas_hirst_on_twitter___re__that__3bln_loan_to_ukraine_that_russia_may_demand_early_repayment_of_—_reminder_of_ukr_payment_needs_through_2015_http___t_co_b9kfvmhz54_.png" border="0" alt="Ukraine Loan"></p>
<p>This leaves the Ukrainian government in an almost impossible situation — either try to change Russian minds, convince the IMF to shift the conditions of its already contentious bailout package (it is highly unusual to provide funds to countries undergoing a civil war), or seek to inflict even deeper losses on private bondholders.</p>
<p>The $3 billion loan was negotiated in 2013 by the previous government under President Viktor Yanukovych, who fled the country following huge anti-government protests on the streets of the Ukrainian capital Kiev. It stipulated that Ukraine had to keep its national debt below 60% of its GDP — a condition that the country has clearly breached as a civil war <span>has hammered state finances and driven the country into a deep recession.</span></p>
<p><span>This has given Moscow the ability to recall the loan whenever it sees fit, acting as a sword of Damocles over the head of the authorities in Kiev.</span></p>
<p><span style="line-height: 1.5em;">Following Yanukovch's departure, pro-Moscow separatists in the eastern regions of Donestsk and Luhansk&nbsp;took up arms against the new government and declared independent republics.&nbsp;</span><span style="line-height: 1.5em;">The rebels are widely considered by the international community to be supported by President Vladimir Putin and both the European Union and the US have imposed economic sanctions on Russia in response.</span></p>
<p><span style="line-height: 1.5em;">Yet despite their involvement in the conflict, Ukraine has so far been unable to work its way out from under the yoke of its debt obligations.</span></p><p><a href="http://uk.businessinsider.com/russia-is-digging-in-its-heels-on-its-3-billion-loan-to-ukraine-2015-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/teenager-fishing-shark-australia-video-2015-1">Incredible Video Of A Teenager Catching A 440-Pound Shark On A Beach</a></p> http://www.businessinsider.com/russia-is-digging-in-its-heels-on-its-3-billion-loan-to-ukraine-2015-3Russia is digging in its heels on its $3 billion loan to Ukrainehttp://www.businessinsider.com/russia-is-digging-in-its-heels-on-its-3-billion-loan-to-ukraine-2015-3
Fri, 27 Mar 2015 11:23:00 -0400Tomas Hirst
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5515761fdd0895f30f8b463e-1200-924/putin-32.jpg" border="0" alt="putin"></p><p>Russia will not negotiate delaying repayment over its $3 billion (£2 billion) loan to Ukraine that is due in December.</p>
<p>Failure to agree on a restructuring of the debt could result in the Ukrainian government being unable to meet the conditions of its latest bailout package agreed with the International Monetary Fund. The agreement requires Ukraine to restructure at least $5.2 billion worth of its debt in 2015.</p>
<p>As <a href="http://uk.businessinsider.com/ukraines-debt-rescue-plan-is-in-trouble-2015-3">AFP reported this morning</a>,&nbsp;IMF spokesman William Murray told the press that "if<span style="line-height: 1.5em;">&nbsp;I'm not mistaken, the $3 billion Eurobond comes from the Russian sovereign wealth fund, so it's official debt". Under IMF rules, it is unable to lend to countries that have defaulted on "official debt" meaning any attempt by the authorities in Kiev to force restructuring on Russia could threaten its $17.5 billion rescue package.</span></p>
<p>Earier today Russian <a href="http://www.interfax.ru/432630">finance minister Anton Siluanov confirmed that the Russian loan would indeed be classified as "official debt"</a> and said that the country was still not ready to restructure the debt "because [Russia] itself is in a difficult situation."</p>
<p>Unfortunately, the Russian loan accounts for a huge chunk of the debt repayments owed by Ukraine this year meaning that its options to find cuts elsewhere are limited:</p>
<p><img src="http://static3.businessinsider.com/image/54b8d97feab8ea4018e04593-663-467/tomas_hirst_on_twitter___re__that__3bln_loan_to_ukraine_that_russia_may_demand_early_repayment_of_—_reminder_of_ukr_payment_needs_through_2015_http___t_co_b9kfvmhz54_.png" border="0" alt="Ukraine Loan"></p>
<p>This leaves the Ukrainian government in an almost impossible situation — either try to change Russian minds, convince the IMF to shift the conditions of its already contentious bailout package (it is highly unusual to provide funds to countries undergoing a civil war), or seek to inflict even deeper losses on private bondholders.</p>
<p>The $3 billion loan was negotiated in 2013 by the previous government under President Viktor Yanukovych, who fled the country following huge anti-government protests on the streets of the Ukrainian capital Kiev. It stipulated that Ukraine had to keep its national debt below 60% of its GDP — a condition that the country has clearly breached as a civil war <span>has hammered state finances and driven the country into a deep recession.</span></p>
<p><span>This has given Moscow the ability to recall the loan whenever it sees fit, acting as a sword of Damocles over the head of the authorities in Kiev.</span></p>
<p><span style="line-height: 1.5em;">Following Yanukovch's departure, pro-Moscow separatists in the eastern regions of Donestsk and Luhansk&nbsp;took up arms against the new government and declared independent republics.&nbsp;</span><span style="line-height: 1.5em;">The rebels are widely considered by the international community to be supported by President Vladimir Putin and both the European Union and the US have imposed economic sanctions on Russia in response.</span></p>
<p><span style="line-height: 1.5em;">Yet despite their involvement in the conflict, Ukraine has so far been unable to work its way out from under the yoke of its debt obligations.</span></p><p><a href="http://www.businessinsider.com/russia-is-digging-in-its-heels-on-its-3-billion-loan-to-ukraine-2015-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/teenager-fishing-shark-australia-video-2015-1">Incredible Video Of A Teenager Catching A 440-Pound Shark On A Beach</a></p> http://www.businessinsider.com/ukraines-debt-rescue-plan-is-in-trouble-2015-3Ukraine's debt rescue plan is in troublehttp://www.businessinsider.com/ukraines-debt-rescue-plan-is-in-trouble-2015-3
Fri, 27 Mar 2015 04:42:05 -0400
<p><img src="http://static3.businessinsider.com/image/55147cc75afbd3a52e8b4567-800/afp-ukraines-russia-debt-threatens-imf-rescue.jpg" border="0" alt="A default by Ukraine on billion in debt owed to Russia this year could threaten the International Monetary Fund's lifeline to the embattled country, an IMF spokesman said"></p><p>Washington (AFP) - A default by Ukraine on $3 billion in debt owed to Russia this year could threaten the International Monetary Fund's lifeline to the embattled country, an IMF spokesman said Thursday.</p>
<p>The Ukrainian government has begun negotiations with creditors for $15 billion in debt relief, part of a $40 billion, four-year financial rescue envisioned by the IMF.</p>
<p>The Fund has approved a $17.5 billion loan to Ukraine as part of the package in exchange for the government's successful implementation of economic, budget and monetary reforms. It has disbursed an initial $5 billion payment.</p>
<p>But, the IMF has warned, the breakdown of a frail ceasefire with pro-Russia rebels in the country's east, the failure to reschedule its debt with private lenders, or domestic political issues could all undermine the plan.</p>
<p>Kiev's debt includes $3 billion lent by Russia in 2010 to the previous Moscow-backed government.</p>
<p>An IMF rule could threaten continuation of the Ukraine aid program. It bars the Fund from lending to a country that has defaulted on a loan in the "official" sector, that is, from a state or public institution.</p>
<p>"We have a non-tolerance policy," IMF spokesman William Murray told reporters at a regularly scheduled news conference.</p>
<p>Ukraine's debt to Russia should be considered state debt, he added.</p>
<p>"If I'm not mistaken, the $3 billion Eurobond comes from the Russian sovereign wealth fund, so it's official debt," he said.</p>
<p>If Russia refuses to renegotiate Ukraine's debt by the end of the year, Ukraine would be forced into default, putting the IMF in a delicate situation.</p>
<p>Questioned about this possibility, the IMF spokesman said "it's really too early to speculate on that."</p>
<p>There are potential ways to circumvent that scenario. The Russian loan could be renegotiated by the Paris Club of creditor nations or could be sold on the secondary market, making it no longer debt to Moscow.</p><p><a href="http://www.businessinsider.com/ukraines-debt-rescue-plan-is-in-trouble-2015-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/what-earth-would-look-like-if-ice-melted-world-map-animation-2015-2">Animated map of what Earth would look like if all the ice melted</a></p> http://www.businessinsider.com/china-is-gearing-up-for-further-engagement-with-the-world-2015-3China is gearing up for 'further engagement with the world'http://www.businessinsider.com/china-is-gearing-up-for-further-engagement-with-the-world-2015-3
Sun, 22 Mar 2015 20:51:00 -0400
<p><img style="float:right;" src="http://static3.businessinsider.com/image/550f635beab8eaee1b3e1b08-1200-924/china-development-forum.jpg" border="0" alt="China Development Forum"></p><p>BEIJING (AP) — International Monetary Fund chief Christine Lagarde said Sunday that China's economic slowdown is legitimate and that Beijing can contribute to global prosperity.</p>
<p>Speaking at the opening of the China Development Forum in Beijing, Lagarde praised Beijing for its work to build a legal system and address pollution.</p>
<p>She said she welcomed Beijing's efforts to boost investment outside China, referring to the new Beijing-led Asian Infrastructure Investment Bank.</p>
<p>She said China is "clearing the path to further engagement with the world through investment, trade and more participation in the multilateral dialogue."</p>
<p>China established the regional lending institution last year and put up most of its initial $50 billion in capital with the goal to finance construction of roads and other infrastructure.</p>
<p>At the forum, Chinese Vice Premier Zhang Gaoli said environmental protection and sustainable development will be Beijing's priorities.</p>
<p>Zhang said China "should always put the environment and our ecological system at a prominent place in our agenda." He listed no-carbon development, green development and sustainable development as China's future path for economic growth.</p>
<p>The forum is an annual gathering of academics, entrepreneurs and representatives of multilateral organizations.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/dylan-ratigan-even-taxis-drivers-in-the-middle-east-understand-whats-wrong-with-america-2015-3#ixzz3VAJJDKDW" >Even taxi drivers in the Middle East understand what's wrong with America</a></strong></p>
<p><a href="http://www.businessinsider.com/china-is-gearing-up-for-further-engagement-with-the-world-2015-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/iphone-headphones-tricks-2015-2">14 things you didn't know your iPhone headphones could do</a></p> http://www.businessinsider.com/r-how-europe-and-us-stumbled-into-spat-over-china-led-bank--2015-3China's checkbook diplomacy is coming of agehttp://www.businessinsider.com/r-how-europe-and-us-stumbled-into-spat-over-china-led-bank--2015-3
Sun, 22 Mar 2015 09:42:00 -0400Paul Taylor and William James
<p><span style="line-height: 1.5em;"><img style="float:right;" src="http://static6.businessinsider.com/image/550ec60eeab8ea26143e1b08-600-/chinese-president-xi-jinping-asian-infrastructure-investment-bank.jpg" border="0" alt="Chinese President Xi Jinping Asian Infrastructure Investment Bank" width="600">BRUSSELS/LONDON (Reuters) - Sometime geopolitical shifts happen by accident rather than design.</span></p>
<p>Historians may record March 2015 as the moment when China's chequebook diplomacy came of age, giving the world's number two economy a greater role in shaping global economic governance at the expense of the United States and the international financial institutions it has dominated since World War Two.</p>
<p>This month European governments chose, in an ill-coordinated scramble for advantage, to join a nascent, Chinese-led Asian Infrastructure Investment Bank (AIIB) in defiance of Washington's misgivings.</p>
<p>British finance minister George Osborne, gleeful at having seized first-mover advantage, stressed the opportunities for British business in a pre-election budget speech to parliament last week.</p>
<p>"We have decided to become the first major western nation to be a prospective founding member of the new Asian Infrastructure Investment Bank, because we think you should be present at the creation of these new international institutions," he said after rebuffing a telephone plea from U.S. Treasury Secretary Jack Lew to hold off.</p>
<p>The move by Washington's close ally set off an avalanche. Irked that London had stolen a march, Germany, France and Italy announced that they too would participate. Luxembourg and Switzerland quickly followed suit.</p>
<p>The trail of transatlantic and intra-European diplomatic exchanges points to fumbling, mixed signals and tactical differences rather than to any grand plan by Europe to tilt to Asia.</p>
<p>That is nevertheless the way it is seen by some in Washington and Beijing.</p>
<p>As recounted to Reuters by officials in Europe, the United States and China who spoke on condition of anonymity because of the sensitivity of the subject, the episode reveals the paucity of strategic dialogue among what used to be called "the West".</p>
<p>It also highlights how the main European Union powers sideline their common foreign and security policy when national commercial interests are at stake.</p>
<p>China's official Xinhua news agency reflected Beijing's delight.</p>
<p>"The joining of Germany, France, Italy as well as Britain, the AIIB's maiden G7 member and a seasoned ally, has opened a decisive crack in the anti-AIIB front forged by America," it said in a commentary.</p>
<p>"Sour grapes over the AIIB makes America look isolated and hypocritical," it said.</p>
<p>Of the main U.S. allies in Asia, Australia appears close to joining, though no formal decision has been made, and Japan and South Korea are considering the possibility.</p>
<p>"The Americans are starting to look very mean-spirited with their criticism," said a Beijing-based Asian diplomat. "This is not a battle they are winning. Even their closest allies in Asia are starting to fall in line."</p>
<h3><span style="line-height: 1.5em;">ANGER AT STALLED IMF REFORM</span></h3>
<p>In Europe as in Washington, China's launch of a new institution to channel a fraction of its massive currency reserves into infrastructure investments in Asia posed a political conundrum and provoked turf disputes.</p>
<p>Western countries had long urged Beijing to recycle some of its trade surplus into building transport, energy and telecommunications networks in developing nations, but they wanted it to use the World Bank and the Asian Development Bank, dominated by the United States and Japan.</p>
<p>China, angered that the U.S. Congress has not ratified a 2010 agreement to increase its voting share and that of other emerging economies in the International Monetary Fund, chose to go its own way instead.</p>
<p>With initial capital of $50 billion, the Beijing-based AIIB can offer at most a complement to the larger World Bank and ADB, but it is starting point for expanding Chinese influence.</p>
<p><img src="http://static2.businessinsider.com/image/550ec4dbeab8eab1033e1b10-1200-600/christine-lagarde-china-development-forum-asian-infrastructure-investment-bank.jpg" border="0" alt="Christine Lagarde China Development Forum Asian Infrastructure Investment Bank"></p>
<p>Officially, the United States says it is concerned about whether the bank will uphold human rights, environment and labor standards and be open and transparent in its governance.</p>
<p>In private, senior U.S. officials acknowledge this is about power. One Obama administration member said Congressional foot-dragging on IMF reform had "created an opportunity for China to assert itself".</p>
<p>Lew gave a blunt assessment last week, telling U.S. lawmakers: "It's not an accident that emerging economies are looking at other places because they are frustrated that, frankly, the United States has stalled a very mild and reasonable set of reforms in the IMF."</p>
<p>Republican Senator Jeff Sessions of Alabama acknowledged irritation about IMF voting rights may have been a factor.</p>
<p>"I think this could be an unfortunate event and it might be bigger than we understand today," he told the Brussels Forum, an annual transatlantic dialogue organized by the German Marshall Fund of the United States.</p>
<p>In Washington, the issue resided between the State Department, the Treasury and the White House National Security Council, which may have muddied U.S. communication with European allies, officials say.</p>
<p>"There just wasn't a clear and coherent and unified message on this from the beginning. It kind of languished for a while in a state of indecision and that produced the outcome that you've seen," said a Congressional source familiar with the discussions.</p>
<p>Within European governments there were debates about tactics and timing but the prevailing view was that it was better to try to influence the Chinese project from inside, several officials said.</p>
<p>"The debate mostly pitted national security advisers, who leaned towards hugging the Americans close ... against economic and Asia advisers, who argued that this big train was leaving the station and it was in our interest to jump aboard," a European diplomat involved in some of the discussions said.</p>
<p>In Berlin, the ministries of foreign affairs, finance and overseas development - run by rival wings of Chancellor Angela Merkel's coalition - jostled for influence.</p>
<p>Merkel's office instructed the finance and foreign ministries to take charge. Given Germany's prioritizing of Chinese trade, there was never much doubt Berlin would join the AIIB.</p>
<p>"It was a no brainer," a German aide said.</p>
<h3>"EYES OPEN"</h3>
<p>British, German, French and Italian officials held several meetings to discuss a common approach then London leapt first, causing resentment if not surprise.</p>
<p>"We want to be a Chinese partner of choice in international finance," a British government source said.</p>
<p>Inconclusive talks were also held by officials of the Group of Seven economies, which includes the United States, Japan and Canada alongside the four European states.</p>
<p>"We knew the U.S. was not in the same place as us on this, we went into it with our eyes open," the source said.</p>
<p><img src="http://static2.businessinsider.com/image/550ec57a6bb3f73f38295744-916-722/asian infrastructure investment bank members map.jpg" border="0" alt="Asian Infrastructure Investment Bank Members Map"></p>
<p>The Chinese invitation to join the AIIB was delivered to individual states. The issue was discussed only once in the EU's 28-nation Economic and Financial Committee, which prepares meetings of finance ministers.</p>
<p>It was never raised to EU ambassadorial level, let alone to ministers. The big four did not include the European Commission or smaller EU states in their deliberations.</p>
<p>A French government source said issues such as governance were unresolved. "But it was important for the Europeans to show an interest from the outset. We'll see how it goes."</p>
<p>In Italy, the decision took a single phone call from Economy Minister Pier Carlo Padoan to Prime Minister Matteo Renzi, the European diplomat said.</p>
<p>Dutch Prime Minister Mark Rutte will meet Chinese President Xi Jinping this week. Officials said the Netherlands was weighing whether to join but it may have missed the deadline to become a founder member.</p>
<p>Having failed to persuade European allies, U.S. officials are looking to regain the initiative, but partisan battles on Capitol Hill may continue to stymie a response.</p>
<p>The administration is using the spat to press Congress to grant President Barack Obama fast-track powers so he can conclude a Trans Pacific Partnership trade pact with 11 Asia-Pacific nations other than China, and to finally ratify the IMF reform.</p>
<p>"We are acting proactively with trade promotion authority and TPP because other countries are acting. We want to be on the field, defining the rules of the road," the Obama administration member said.</p>
<p>(Additional reporting by David Brunnstrom and Jason Lange in Washington, Robin Emmott and Adrian Croft in Brussels, Andreas Rinke in Berlin, Elizabeth Pineau in Paris, Ben Blanchard in Beijing and Elisabetta Jucca in Hong Kong. Editing by Mike Peacock.)</p><p><a href="http://www.businessinsider.com/r-how-europe-and-us-stumbled-into-spat-over-china-led-bank--2015-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/going-clear-sundance-premiere-scientology-bombshells-2015-1">6 Crazy Things Revealed In HBO's Explosive New Scientology Documentary 'Going Clear'</a></p> http://www.businessinsider.com/r-imf-happy-to-cooperate-with-china-on-aiib-lagarde-2015-3The IMF says it would be 'delighted' to cooperate with China's new bankhttp://www.businessinsider.com/r-imf-happy-to-cooperate-with-china-on-aiib-lagarde-2015-3
Sun, 22 Mar 2015 07:53:14 -0400Dominique Patton
<p><img style="float:right;" src="http://static6.businessinsider.com/image/550e77c35afbd327468b4567-450-300/imf-happy-to-cooperate-with-china-on-aiib-lagarde-2015-3.jpg" border="0" alt="IMF Managing Director Christine Lagarde attends the opening ceremony of China Development Forum about "></p><p></p>
<p>BEIJING (Reuters) - The International Monetary Fund will be "delighted" to cooperate with the China-led Asian Infrastructure Investment Bank (AIIB), said IMF managing director Christine Lagarde on Sunday.</p>
<p>Lagarde added that there is "massive" room for co-operation with AIIB on infrastructure financing.</p>
<p>The World Bank will also cooperate with the AIIB, Lagarde told a conference in Beijing.</p>
<p>Her comments come after a number of countries said they would participate in the new bank slated to start operations by the end of the year, even as others raised concerns over potential competition with other lenders.</p>
<p>(Reporting by Kevin Yao, editing by Louise Heavens)</p><p><a href="http://www.businessinsider.com/r-imf-happy-to-cooperate-with-china-on-aiib-lagarde-2015-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/iphone-headphones-tricks-2015-2">14 things you didn't know your iPhone headphones could do</a></p> http://www.businessinsider.com/greek-crisis-most-important-people-2015-2These are the 18 key players in Greece's crisis negotiationshttp://www.businessinsider.com/greek-crisis-most-important-people-2015-2
Wed, 18 Feb 2015 10:40:02 -0500Mike Bird
<p><img style="float:right;" src="http://static2.businessinsider.com/image/54e4b260dd08952a0a8b45d3-1200-924/yanis-lagarde-dijsselboem-43.jpg" border="0" alt="Yanis, Lagarde, Dijsselboem 4*3"></p><p>Greece's crisis negotiations are rolling on, and the country's radical new government is <a href="http://uk.businessinsider.com/greeces-loan-extension-request-eurogroup-2015-2">currently still at loggerheads with Europe's most important decision-makers</a>.&nbsp;</p>
<p>Greece wants to renegotiate a more favourable bailout deal from Europe, with less austerity. Europe's finance ministers want the country's current bailout to continue. Without a deal, Greece's international credit runs dry at the end of February.</p>
<p>But who has Greece got fighting in its corner, and who is the new government going up against?</p>
<p>There are a handful of key decision-makers in the process, some of whom are loud and prominent, and some of whom take a background role.&nbsp;</p><h3>18.) Lazard Banker Mattieu Pigasse - Pigasse is both a highly regarded financier and a 'pro-market socialist' advising the Greek government on its debt negotiations.</h3>
<img src="http://static6.businessinsider.com/image/54e4b261dd08952a0a8b45d5-400-300/18-lazard-banker-mattieu-pigasse-pigasse-is-both-a-highly-regarded-financier-and-a-pro-market-socialist-advising-the-greek-government-on-its-debt-negotiations.jpg" alt="" />
<br/><br/><h3>17 and 16.) Finance ministers Luis de Guindos (Spain) and Michael Noonan (Ireland) - Both countries struggled in the euro crisis and are now taking tough stances on Greece, backing the current bailout.</h3>
<img src="http://static4.businessinsider.com/image/54e4b261dd08952a0a8b45d6-400-300/17-and-16-finance-ministers-luis-de-guindos-spain-and-michael-noonan-ireland-both-countries-struggled-in-the-euro-crisis-and-are-now-taking-tough-stances-on-greece-backing-the-current-bailout.jpg" alt="" />
<br/><br/><h3>15.) IMF Managing Director Christine Lagarde - The IMF holds a large amount of Greek debt, and its stance holds huge sway around the world. </h3>
<img src="http://static2.businessinsider.com/image/54e4b261dd08952a0a8b45d7-400-300/15-imf-managing-director-christine-lagarde-the-imf-holds-a-large-amount-of-greek-debt-and-its-stance-holds-huge-sway-around-the-world.jpg" alt="" />
<br/><br/><a href="http://www.businessinsider.com/greek-crisis-most-important-people-2015-2#14-bank-of-greece-governor-yannis-stournaras-hes-responsible-for-taking-greek-banks-case-to-the-ecb-especially-crucial-if-they-need-emergency-assistance-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/ukraine-40-billion-bailout-russia-imf-2015-2Ukraine is getting a $40 billion international bailout with its peace planhttp://www.businessinsider.com/ukraine-40-billion-bailout-russia-imf-2015-2
Thu, 12 Feb 2015 08:27:00 -0500Mike Bird
<p><img style="float:right;" src="http://static2.businessinsider.com/image/54ca00c8dd089520218b46d2-1200-924/ukraine-apcs-flags.jpg" border="0" alt="Ukraine APCs flags"></p><p>The International Monetary Fund (IMF) announced early Thursday that&nbsp;Ukraine was getting a massive bailout totalling $40 billion (£26.2 billion) to prop up its struggling economy.&nbsp;</p>
<p>The overthrow of Ukraine's previous government and the war in the country's eastern region, which has been raging since March when Russia annexed Crimea, have been a huge hit to the country's public finances.&nbsp;The IMF will give the Ukrainian government $17.5 billion (£11.5 billion). Combined with financial assistance from the international community, the financial package amounts to about $40 billion in support over the next four years.&nbsp;</p>
<p>In a <a href="http://www.imf.org/external/np/sec/pr/2015/pr1550.htm">statement</a>,&nbsp;IMF managing director Christine Lagarde said:<a href="http://www.imf.org/external/np/sec/pr/2015/pr1550.htm"><br></a></p>
<p style="padding-left: 30px;">I am pleased to announce that the IMF team working in Kiev has reached a staff-level agreement with the Ukrainian government on a new economic reform program that would be supported by an Extended Fund Facility of SDR 12.35 billion (about $17.5 billion, €15.5 billion) from the IMF, as well as by additional resources from the international community. I intend to recommend this program for consideration to the IMF Executive Board. This new four-year arrangement would support immediate economic stabilisation in Ukraine as well as a set of bold policy reforms aimed at restoring robust growth over the medium term and improving living standards for the Ukrainian people ...</p>
<p style="padding-left: 30px;">The change in the IMF-supported program (from Stand-By Arrangement to Extended Fund Facility) will itself provide more funding, more time, more flexibility, and better financing terms for Ukraine to implement its reform agenda. These IMF resources will be complemented by other bilateral and multilateral financing. In addition, as the Ukrainian government has previously announced, it intends to hold consultations with the holders of their sovereign debt with a view to improving medium-term sustainability. From these various sources taken together, a total financing package of around $40 billion is estimated over the four year period.</p>
<p>Early Thursday it looked like peace talks among world leaders in Belarus <span>over a cease-fire in Ukraine</span>&nbsp;were falling apart, at least according to Ukrainian President Petro Poroshenko. According to the BBC, <span>Poroshenko</span>&nbsp;said&nbsp;<a href="http://www.bbc.co.uk/news/world-europe-31434528">Russia's position was still "unacceptable" and that there was "no good news yet."</a><br><a href="http://www.bbc.co.uk/news/world-europe-31434528"></a></p>
<p>But nevertheless, a<a href="http://uk.businessinsider.com/putin-agrees-to-ceasefire-in-ukraine-2015-2">bout an hour later a shaky agreement was announced</a>, predicated on a ceasefire beginning 15 February.&nbsp;</p><p><a href="http://www.businessinsider.com/ukraine-40-billion-bailout-russia-imf-2015-2#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/largest-ice-glacier-calving-filmed-2015-1">This Video Of The Largest Breakage Of Ice From A Glacier Ever Filmed Is Absolutely Frightening</a></p> http://www.businessinsider.com/imf-india-will-overtake-china-2015-1IMF: India Will Soon Overtake China In Economic Growthhttp://www.businessinsider.com/imf-india-will-overtake-china-2015-1
Tue, 20 Jan 2015 10:37:04 -0500Chris Pash
<p><img style="float:right;" src="http://static6.businessinsider.com/image/5149bbbfeab8eacc5b000004-1200-900/taj-mahal-palace-in-india.jpg" border="0" alt="Taj Mahal Palace in India"></p><p>India will next year overtake China in economic growth, according to new forecasts by the IMF (International Monetary Fund).</p>
<p>The IMF, releasing in Beijing its update to the World Economic Outlook, said economic growth in China would fall in 2015 to 6.8% from 7.4% in 2014.</p>
<p>And in 2016, China’s growth would ease to 6.3% while India would hit 6.5% (up from 6.3% this year).</p>
<p>Globally, the IMF has slightly downgraded its estimate on world economic growth for 2015 to 3.5% from 3.7%.</p>
<p>The IMF has revised upward to 3.6% economic growth in the US, and has put Euro area growth at 1.2% and Japan growth down to 0.6%.</p>
<p>The IMF says leading indicators point to a further slowdown in China.</p>
<p>“The authorities are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation,” the IMF update says.</p>
<p>“Lower growth in China will also have important regional effects, which partly explains the downward revisions to growth in much of emerging Asia.”</p>
<p>India will next year overtake China in economic growth, according to new forecasts by the IMF (International Monetary Fund).</p>
<p>The IMF, releasing in Beijing its update to the World Economic Outlook, said economic growth in China would fall in 2015 to 6.8% from 7.4% in 2014.</p>
<p>And in 2016, China’s growth would ease to 6.3% while India would hit 6.5% (up from 6.3% this year).</p>
<p>Globally, the IMF has slightly downgraded its estimate on world economic growth for 2015 to 3.5% from 3.7%.</p>
<p>The IMF has revised upward to 3.6% economic growth in the US, and has put Euro area growth at 1.2% and Japan growth down to 0.6%.</p>
<p>The IMF says leading indicators point to a further slowdown in China.</p>
<p>“The authorities are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation,” the IMF update says.</p>
<p>“Lower growth in China will also have important regional effects, which partly explains the downward revisions to growth in much of emerging Asia.”</p>
<p><strong>Here are the full forecasts:</strong></p>
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Tue, 20 Jan 2015 07:34:00 -0500Tomas Hirst
<p><img style="float:right;" src="http://static1.businessinsider.com/image/5464776bdd0895f5468b45de-1200-924/christine-lagarde.jpg" border="0" alt="christine lagarde"></p><p>The International Monetary Fund (IMF) has released its updated forecasts for the global economy, and it makes for grim reading. Among the growth downgrades, however, is a point that most commentators are overlooking: the real dangers of the oil-price shock for Western economies.</p>
<p>Despite the tumbling of oil prices by over 50% since June, providing a welcome boost to consumers through lower prices of fuel and goods, the IMF has downgraded its forecast for global growth by 0.3% this year and another 0.3% in 2016. The downgrades reflect the ongoing weakness of the eurozone and Japan, as well as slowing growth in emerging markets (especially among oil exporters).</p>
<p>However, the report also contains a warning for advanced economies such as those of the US and the UK that are seeing relatively robust economic expansion. Lower oil prices are helping drag down inflation and could mean that even faster-growth economies experience a period of falling prices. If this is allowed to continue unchecked, the IMF warns, it risks becoming a self-feeding deflationary spiral.</p>
<p>With central bank interest rates already around zero, the ability of monetary policy to offset these price falls and help bring inflation back toward the 2% target is limited (at least according to mainstream economic theory).</p>
<p>As <a href="http://www.imf.org/external/pubs/ft/survey/so/2015/new012015a.htm">the international funding body puts it</a> (emphasis added):</p>
<p><img src="http://static4.businessinsider.com/image/54be4b78dd0895ab068b4577-862-295/imf_survey___global_growth_revised_down__despite_cheaper_oil__faster_u_s__growth%202.png" border="0" alt="IMF Survey"></p>
<p>That is, the IMF is encouraging central banks to undertake precautionary easing and, where that is unavailable because of existing low interest rates, to use government spending on infrastructure to increase economic activity and push up the rate of price increases. Low government borrowing costs across much of the developed world mean in effect that states have room to do this at very limited (or even negative in the case of Germany and Switzerland) cost to taxpayers, despite heavy debt burdens following the financial crisis.</p>
<p><span><span>Not everyone is convinced. Numerous economists argue that a temporary period of deflation because of a positive supply shock — whereby prices are falling because more goods can be made for the same amount of money — does not require any action from a central bank. It should be a cause for celebration.</span></span></p>
<p><span><span>Many of those who hold this position also argue that central banks can simply undertake further rounds of asset purchases under their so-called quantitative easing programmes if they become concerned that expectations of price falls are becoming entrenched and people are holding off purchases. </span></span></p>
<p><span><span>However, t<span>he IMF's intervention can be seen as a warning against the complacency of such a view. T</span>he effectiveness of QE in reversing price falls remains a matter of much debate in the economics profession and relying on unconventional central bank tools to reverse price falls after they have set in could be seen as too great a risk.</span></span></p>
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<h3><strong><a href="http://www.businessinsider.com/driving-a-self-driving-car-2015-1"></a></strong></h3><p><a href="http://www.businessinsider.com/the-imf-worries-about-the-deflationary-impact-of-falling-oil-prices-in-its-latest-world-economic-outlook-2015-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/imf-paper-shows-how-a-housing-crisis-lingers-2015-1How A Housing Crisis Can Hobble A Nation's Economy For Yearshttp://www.businessinsider.com/imf-paper-shows-how-a-housing-crisis-lingers-2015-1
Sun, 18 Jan 2015 11:15:00 -0500Tomas Hirst
<p><img style="float:right;" src="http://static1.businessinsider.com/image/54b3ef82dd0895c7528b45a7-910-683/house-fire-flame-burn-1.jpg" border="0" alt="house fire flame burn"></p><p>A property price crash can cripple a nation's economy for years to come, <a href="http://www.imf.org/external/pubs/ft/scr/2015/cr1501.pdf">according to a new paper by the IMF.</a></p>
<p>Although most people understand that the crisis of 2007-2008 led to a housing-price collapse and the Great Recession that followed, the new paper describes exactly why it is that a housing bubble also manages to trigger unemployment, revenue decline at corporations, and lower GDP.</p>
<p>One chart shows that even years later, consumer spending in Ireland — one of the hardest hit by the crash — remains up to 20% below its peak. (Private consumption is normally the largest component of a developed nation's total GDP.)</p>
<p>For many countries, the run-up to the financial crisis was marked by the sharp concentration of investment in the housing market both by individuals and the financial sector.</p>
<p>Indeed, as <a href="http://ftalphaville.ft.com/2015/01/09/2082512/easy-money-housing-bubbles-and-financial-crises/">Matthew Klein puts it in a recent article in FT Alphaville,</a> "the growth of the financial sector since the 1970s can be attributed almost entirely to the explosion of mortgage credit (mostly residential but also commercial) rather than lending for business investment or traditional consumer borrowing".</p>
<p>So what happens when the housing market goes bust?</p>
<p>A <a href="http://www.imf.org/external/pubs/ft/scr/2015/cr1501.pdf">recent International Monetary Fund (IMF) paper</a> looked at the fortunes of four European countries over the crisis that all experienced housing booms followed by busts —&nbsp;<span style="line-height: 1.5em;">Denmark, Ireland,&nbsp;</span><span style="line-height: 1.5em;">the Netherlands, and Spain. Although the differences in their experiences are marked in terms of the severity of the downturns they experienced, there are a number of common features that could prove crucial to our understanding of the impact of future economic shocks.</span></p>
<p><span style="line-height: 1.5em;">Firstly, falling house prices lowered demand both during and after the crisis. This is because lower prices reduce the amount of borrowing that households can raise against their property. Less access to credit tends to mean less spending, generally.<br></span></p>
<p><span style="line-height: 1.5em;">It also increases the loan-to-value ratio of mortgage debt (the value of the debt will rise as a percentage of the value of the property as prices fall). In some cases, this leads to negative equity, whereby even selling the house will not be sufficient to repay the debt. This traps people in their properties, prevents them from borrowing further against the property, or forces them into bankruptcy. </span></p>
<p><span style="line-height: 1.5em;">In all scenarios, the owners can't clear their debts or take a profit on a sale — and that depresses spending too.<br></span></p>
<p><span style="line-height: 1.5em;">Moreover, housing has increasingly become the savings vehicle of choice. Substantial falls in the value of housing assets could have implications for the sustainability of people's finances in retirement and force precautionary saving (people holding on to more of their income rather than spending it) in order to compensate for this perceived shortfall.</span></p>
<p><span style="line-height: 1.5em;">As you can see from the IMF chart below, falling house prices appeared to have weighed on private consumption in all of the countries that the paper looked at during the crisis. Note how far Ireland's consumption has fallen from the peak:</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static1.businessinsider.com/image/54b3ef82dd0895c7528b45a4-1200-500/www_imf_org_external_pubs_ft_scr_2015_cr1501_pdf 5.png" border="0" alt="IMF housing crash paper">However, the housing bust also impacted demand by curtailing investment both directly and by restricting small business investment, which is overwhelmingly secured against property. This has the short-term impact of reducing the amount currently being spent in an economy, but also longer-term costs as it holds back new business creation and prevents investment to expand existing small businesses.</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static3.businessinsider.com/image/54b3ef82dd0895c7528b45a5-679-514/presentation1 3.png" border="0" alt="IMF Housing Crash paper Investment"></span></p>
<p><span style="line-height: 1.5em;">If prices fail to return to pre-bust levels, a housing crash can leave a large debt overhang, forcing households to focus on paying down their debts and constraining domestic demand. At the end of 2013 almost 30% of mortgages in the Netherlands were still categorised as "underwater" (the value of the property is worth less than the mortgage held against it), while in Ireland that figure is a staggering 52%.</span></p>
<p><span style="line-height: 1.5em;">By contrast the figure for the US is 13% and for the UK it is somewhere between 1.6-6.4%.</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static1.businessinsider.com/image/54b3ef82dd0895c7528b45a6-1135-443/www_imf_org_external_pubs_ft_scr_2015_cr1501_pdf 7.png" border="0" alt="IMF Housing Crash paper mortgages"><br></span></p>
<p>And this time really is different. As the IMF says:</p>
<p>"<span style="line-height: 1.5em;">High private-sector indebtedness could be one factor behind weak domestic demand, as (i) both the peak&nbsp;</span><span style="line-height: 1.5em;">level of debt and the increase in debt during the boom were much higher in the current episodes than&nbsp;</span><span style="line-height: 1.5em;">during past episodes and (ii) a number of studies (e.g., IMF, 2012; Mian and Sufi, 2014) find that debt&nbsp;</span><span style="line-height: 1.5em;">overhang tends to weigh heavily on growth following financial crises."</span></p>
<p>This debt overhang will continue to exert an economic drag for years after the initial impact of the financial crisis has abated, holding down growth, lowering the ability of people to move to find new jobs and maintaining pressure on household finances. As such the effects of a housing crash should be seen as the long tail of the Great Recession beast — still thrashing about even after the threat of catastrophe has been averted.</p><p><a href="http://www.businessinsider.com/imf-paper-shows-how-a-housing-crisis-lingers-2015-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/christine-lagarde-swiss-national-bank-decision-2015-1The IMF Didn't Know What The Swiss National Bank Had Plannedhttp://www.businessinsider.com/christine-lagarde-swiss-national-bank-decision-2015-1
Thu, 15 Jan 2015 14:19:55 -0500Shane Ferro
<p><img style="float:right;" src="http://static5.businessinsider.com/image/54b80ef6eab8ea745b641217-664-498/home-alone-surprised-face-13.png" border="0" alt="home alone surprised face"></p><p>Christine Lagarde, the head of the IMF, was everywhere today.</p>
<p>She spoke at a Council on Foreign Relations <a href="http://www.cfr.org/economics/next-global-economy-look-ahead-2015/p35940?hootPostID=bece4b2072b9fe07beb68eabca3f0bd8">event this morning</a> about where she sees the global economy going in 2015.</p>
<p>Lagarde also went on CNBC and <a href="http://www.cnbc.com/id/102342044">spoke with Steve Liesman</a> about the&nbsp;Swiss National Bank's decision to lift the floor on the Swiss franc.</p>
<p>Lagarde said she had no idea that it was going to happen, and subtly suggested that she wasn't too happy that the IMF was left out of the loop.</p>
<p>"I find it a bit surprising that he did not contact me, but, you know, we'll check on that. By the way, the IMF used to be the referee of any currency variation. That has changed over time," she said.&nbsp;</p>
<p>After the SNB's announcement this morning that it would stop the franc from appreciating too much against the euro, the latter currency crashed. At one point, <a href="http://uk.businessinsider.com/the-swiss-franc-is-rocketing-upwards-2015-1">it was down by 30%</a>&nbsp;from the previous day's close against the Swiss franc. <a href="http://www.businessinsider.com/swiss-national-bank-loses-60-billion-francs-2015-1">Mike Bird</a> reported earlier today that "t<span style="font-size: 15px; line-height: 1.5em;">he franc's value dropped by about 14% against the dollar last year, and the SNB was getting worried about 'divergences between the monetary policies of the major currency areas.'"&nbsp;</span></p>
<p>Find the <a href="http://www.cnbc.com/id/102342044">full transcript at CNBC</a>.&nbsp;</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/kocherlakota-thinks-4-unemployment-to-see-wage-growth-2015-1" >Fed President: I've Got 4% Unemployment In My District, And I'm Just Barely Seeing Wage Pressure</a></strong></p>
<p><a href="http://www.businessinsider.com/christine-lagarde-swiss-national-bank-decision-2015-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/imf-paper-on-impact-of-europe-housing-crisis-2015-1A Housing Crisis Can Cripple A Nation's Economy For Yearshttp://www.businessinsider.com/imf-paper-on-impact-of-europe-housing-crisis-2015-1
Mon, 12 Jan 2015 10:59:00 -0500Tomas Hirst
<p><img style="float:right;" src="http://static1.businessinsider.com/image/54b3ef82dd0895c7528b45a7-910-683/house-fire-flame-burn-1.jpg" border="0" alt="house fire flame burn"></p><p>A property-price crash can cripple a nation's economy for years to come, <a href="http://www.imf.org/external/pubs/ft/scr/2015/cr1501.pdf">according to a new paper by the International Monetary Fund.</a></p>
<p>Although most people understand that the crisis of 2007-2008 led to a housing-price collapse and the Great Recession that followed, the new paper describes exactly why it is that a housing bubble also manages to trigger unemployment, revenue decline at corporations, and lower gross domestic product.</p>
<p>One chart shows that even years later, consumer spending in Ireland — one of the hardest hit by the crash — remains up to 20% below its peak. (Private consumption is normally the largest component of a developed nation's total GDP.)</p>
<p>For many countries, the run-up to the financial crisis was marked by the sharp concentration of investment in the housing market by both individuals and the financial sector.</p>
<p>Indeed, as <a href="http://ftalphaville.ft.com/2015/01/09/2082512/easy-money-housing-bubbles-and-financial-crises/">Matthew Klein puts it in a recent article in FT Alphaville,</a> "the growth of the financial sector since the 1970s can be attributed almost entirely to the explosion of mortgage credit (mostly residential but also commercial) rather than lending for business investment or traditional consumer borrowing."</p>
<p>So what happens when the housing market goes bust?</p>
<p>A <a href="http://www.imf.org/external/pubs/ft/scr/2015/cr1501.pdf"></a><a href="http://www.imf.org/external/pubs/ft/scr/2015/cr1501.pdf">recent IMF paper</a><span style="line-height: 1.5em;"> looked at the fortunes of four European countries that all experienced housing booms followed by busts — </span><span style="line-height: 1.5em;">Denmark, Ireland, </span><span style="line-height: 1.5em;">the Netherlands, and Spain. Although the differences in their experiences are marked in terms of the severity of the downturns they experienced, there are numerous common features that could prove crucial to our understanding of the impact of future economic shocks.</span></p>
<p><span style="line-height: 1.5em;">Firstly, falling house prices lowered demand both during and after the crisis. This is because lower prices reduce the amount of borrowing that households can raise against their property. Less access to credit tends to mean less spending, generally.<br></span></p>
<p><span style="line-height: 1.5em;">It also increases the loan-to-value ratio of mortgage debt (the value of the debt will rise as a percentage of the value of the property as prices fall). In some cases, this leads to negative equity, whereby even selling the house will not be sufficient to repay the debt. This traps people in their properties, prevents them from borrowing further against the property, or forces them into bankruptcy. </span></p>
<p><span style="line-height: 1.5em;">In all scenarios, the owners can't clear their debts or take a profit on a sale — and that depresses spending, too.<br></span></p>
<p><span style="line-height: 1.5em;">Moreover, housing has increasingly become the savings vehicle of choice. Substantial falls in the value of housing assets could have implications for the sustainability of people's finances in retirement and force precautionary saving (people holding on to more of their income rather than spending it) to compensate for this perceived shortfall.</span></p>
<p><span style="line-height: 1.5em;">As you can see from the IMF chart below, falling house prices appeared to have weighed on private consumption in all of the countries the paper looked at during the crisis. Note how far Ireland's consumption has fallen from the peak:</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static6.businessinsider.com/image/54b3ef82dd0895c7528b45a4-1200-500/www_imf_org_external_pubs_ft_scr_2015_cr1501_pdf%205.png" border="0" alt="IMF housing crash paper">However, the housing bust also affected demand by curtailing investment both directly and by restricting small business investment, which is overwhelmingly secured against property. This has the short-term impact of reducing the amount being spent in an economy, but it also has longer-term costs as it holds back creation of new businesses and prevents investment to expand existing small businesses.</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static4.businessinsider.com/image/54b3ef82dd0895c7528b45a5-679-514/presentation1%203.png" border="0" alt="IMF Housing Crash paper Investment"></span></p>
<p><span style="line-height: 1.5em;">If prices fail to return to pre-bust levels, a housing crash can leave a large debt overhang, forcing households to focus on paying down their debts and constraining domestic demand. At the end of 2013 almost 30% of mortgages in the Netherlands were still categorized as "underwater" (the value of the property is worth less than the mortgage held against it), while in Ireland that figure is a staggering 52%.</span></p>
<p><span style="line-height: 1.5em;">By contrast the figure for the US is 13%, and for the UK it is somewhere between 1.6% and 6.4%.</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static5.businessinsider.com/image/54b3ef82dd0895c7528b45a6-1135-443/www_imf_org_external_pubs_ft_scr_2015_cr1501_pdf%207.png" border="0" alt="IMF Housing Crash paper mortgages"><br></span></p>
<p>And this time really is different. As the IMF says:</p>
<p>"<span style="line-height: 1.5em;">High private-sector indebtedness could be one factor behind weak domestic demand, as (i) both the peak </span><span style="line-height: 1.5em;">level of debt and the increase in debt during the boom were much higher in the current episodes than </span><span style="line-height: 1.5em;">during past episodes and (ii) a number of studies (e.g., IMF, 2012; Mian and Sufi, 2014) find that debt </span><span style="line-height: 1.5em;">overhang tends to weigh heavily on growth following financial crises."</span></p>
<p>This debt overhang will continue to exert an economic drag for years after the initial impact of the financial crisis has abated, holding down growth, lowering the ability of people to move to find new jobs and maintaining pressure on household finances. As such the effects of a housing crash should be seen as the long tail of the Great Recession beast — still thrashing about even after the threat of catastrophe has been averted.</p>
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<p><span style="line-height: 1.5em;"> </span></p>
<h3><strong><a href="http://www.businessinsider.com/4-robots-designed-make-life-easier-for-us-all-2014-12"></a></strong></h3><p><a href="http://www.businessinsider.com/imf-paper-on-impact-of-europe-housing-crisis-2015-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-imf-helped-push-japan-into-disastrous-sales-tax-increase-2014-11The IMF Pushed Japan Into A Disastrous Sales Tax Increasehttp://www.businessinsider.com/the-imf-helped-push-japan-into-disastrous-sales-tax-increase-2014-11
Tue, 18 Nov 2014 07:26:00 -0500Tomas Hirst
<p><img style="float:right;" src="http://static4.businessinsider.com/image/546b3aebdd08956c158b460c-1200-924/lagarde.jpg" border="0" alt="Lagarde"></p><p>The International Monetary Fund (IMF) has again become mired in controversy over its economic advice.</p>
<p>Earlier this year the Fund admitted that it had "got it wrong" in its warnings to the UK government over its budget plans. If that wasn't bad enough, it may now face a similar embarrassment in Japan having given the country what now looks to be some very bad advice: raising sales tax while trying to pull its economy out of its decades-long stagnation.</p>
<p><a href="http://www.imf.org/external/pubs/ft/scr/2014/cr14236.pdf">In July the IMF published its consultation report on the country</a> following&nbsp;bilateral discussions with the authorities there. Below was one of its main conclusions (emphasis added):</p>
<p style="padding-left: 30px;">"<span style="line-height: 1.5em;">The consumption tax rate increase in&nbsp;</span><span style="line-height: 1.5em;">April to 8 percent was a major achievement, but is only a first step towards fiscal sustainability...</span><span style="line-height: 1.5em;">The second consumption tax rate increase in 2015 to 10 percent with a uniform rate&nbsp;</span><span style="line-height: 1.5em;">should be confirmed. <strong>Raising the tax rate further at a moderate pace would help establish fiscal&nbsp;</strong></span><span style="line-height: 1.5em;"><strong>policy credibility</strong>. Staff estimates that fiscal consolidation in 2015 would slow growth by ½ percent,&nbsp;</span><span style="line-height: 1.5em;">leaving growth in 2015/16 still above potential under the baseline."</span></p>
<p><span style="line-height: 1.5em;"><img style="float:right;" src="http://static1.businessinsider.com/image/546b3aebdd08956c158b460a-803-452/screen shot 2014-11-18 at 11.41.06.png" border="0" alt="Japan public debt">The Fund was responding to concerns surrounding Japan's rising government debt burden. Under its baseline scenario public debt is set to increase to over 275% of GDP by 2030 without significant steps taken to address the problem.</span></p>
<p><span style="line-height: 1.5em;">However, despite these concerns <a href="http://www3.nhk.or.jp/nhkworld/english/news/20141118_04.html">Prime Minister Shinzo Abe has announced plans to indefinitely delay&nbsp;the second sales tax increase</a>, which was scheduled to take place next October. This comes after the country fell into a recession in the third quarter after it posted its second consecutive quarterly fall in output.</span></p>
<p><span style="line-height: 1.5em;"><img class="float_left" src="http://static4.businessinsider.com/image/546b3aebdd08956c158b460b-814-340/japan-real-household-consumption-ex-imp-rent_png__812×332_.png" border="0" alt="Japan real household consumption">Japanese GDP fell by&nbsp;0.4% in the third quarter following a 1.8% contraction in Q2, mainly due to a collapse in consumer spending. <a href="http://www.reuters.com/article/2014/11/05/us-japan-economy-wages-idUSKBN0IP04920141105">Many analysts blame the falls in household spending on the consumption tax increase</a>, while an expected pick-up in wages also failed to materialise (in fact, real wages have been falling dropping a further 2.9% in September compared to a year earlier mostly due to the impact of the sales tax hike on prices).</span></p>
<p><span style="line-height: 1.5em;">In its report, the IMF advocate a scenario where the authorities would commit to "</span><span style="line-height: 1.5em;">increasing the consumption tax to at least&nbsp;</span><span style="line-height: 1.5em;">15%" post 2015. This now seems almost wholly implausible without a marked improvement in wage growth.</span></p>
<p><span style="line-height: 1.5em;">All that remains to be seen now is whether the IMF will accept <a href="https://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf">its claim in 2011 that raising the consumption tax rate "</a></span><a href="https://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf"><span style="line-height: 1.5em;">is less detrimental to&nbsp;</span></a><span style="line-height: 1.5em;"><a href="https://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf">growth compared with other taxes"</a>&nbsp;has proven overoptimistic and that its suggested remedy for Japan's debt problems has in reality set the country's recovery back. It may already be past time for another mea culpa.</span></p><p><a href="http://www.businessinsider.com/the-imf-helped-push-japan-into-disastrous-sales-tax-increase-2014-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/imf-boss-christine-lagarde-says-the-g20-isnt-creating-enough-jobs-2014-11IMF Boss Christine Lagarde Says The G20 Isn't Creating Enough Jobshttp://www.businessinsider.com/imf-boss-christine-lagarde-says-the-g20-isnt-creating-enough-jobs-2014-11
Thu, 13 Nov 2014 04:18:30 -0500AFP
<p><img style="float:right;" src="http://static1.businessinsider.com/image/5464776bdd0895f5468b45de-1200-924/christine-lagarde.jpg" border="0" alt="christine lagarde"></p><p>Brisbane (Australia) (AFP) - International Monetary Fund chief Christine Lagarde has backed the G20's pledge to raise economic output by 2.0 percent in the next five years, but warned it will not create all the jobs needed.</p>
<p>Speaking to the Australian Financial Review from Washington before heading to Brisbane for this weekend's meeting of the world's 20 biggest economies, Lagarde said focusing on growth was the right strategy.</p>
<p>Host Australia has pushed for members to commit to reforms, including cutting red tape and encouraging private infrastructure investment, in a bid to boost the group's economic output by US$2 trillion.</p>
<p>"Moving the needle up two points over five years is certainly an improvement," the former French finance minister said in comments published Thursday.</p>
<p>"Is it going to be sufficient to deliver all the jobs that are needed? No. But it's certainly a step in the right direction if it is implemented."</p>
<p>In a report ahead of the summit, the IMF said the world economy faced stiff headwinds from sluggish growth in Europe and Japan and a slowdown in emerging economies.</p>
<p>It trimmed its growth forecast for the year to 3.3 percent, from 3.4 percent, citing geopolitical tensions and volatility in financial markets, and urged advanced economies to tackle high unemployment by spending more to generate jobs.</p>
<p>"The recovery is under way but is uneven, fragile and with downside risks on the horizon," Lagarde told the financial daily newspaper.</p>
<p>On the upside, the Washington-based body said a nearly 20 percent fall in oil prices since September would, if sustained, aid growth.&nbsp;</p>
<p>Lagarde said she had a "strong confidence" a deal on the 2.0 percent goal would be reached this weekend and praised the government of Australian Prime Minister Tony Abbott for focusing the G20 agenda.</p>
<p>"I think the Australians have done something to be satisfied and proud of because there are deliverables and they are passing the baton to Turkey with a bunch of good things done," she said.</p>
<p>"Early on they identified the agenda, they were very focused and did not try to cover the entire planet of issues. They managed to pull off the growth agenda."</p>
<p>US President Barack Obama, China counterpart Xi&nbsp;Jinping and India's Prime Minister Narendra Modi are among the leaders to be hosted by Abbott in Brisbane for the two-day summit.</p><p><a href="http://www.businessinsider.com/imf-boss-christine-lagarde-says-the-g20-isnt-creating-enough-jobs-2014-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/afp-imf-reforms-threatened-by-republican-electoral-sweep-2014-11IMF'S LAGARDE: I Will Belly-Dance For Congress If I Have Tohttp://www.businessinsider.com/afp-imf-reforms-threatened-by-republican-electoral-sweep-2014-11
Sun, 09 Nov 2014 15:09:00 -0500Jeremy Tordjman
<p><img style="float:right;" src="http://static4.businessinsider.com/image/545fc9626bb3f7f354caf144-1200-924/george-osborne-christine-lagarde.jpg" alt="George Osborne Christine Lagarde" border="0"></p><p>Washington (AFP) - International Monetary Fund chief Christine Lagarde might need to get to work perfecting her belly-dance.</p>
<p>The normally reserved head of the global crisis lender promised in October to perform for the US Congress if that would get it to endorse crucial, much-delayed reforms for the Fund.</p>
<p>"I will do belly-dancing if that's what it takes to get the US to ratify," she said.</p>
<p>But now the Republican victory in Tuesday's US elections has likely placed ratification further away -- and she will have to work harder to convince the IMF's largest shareholder.</p>
<p>"The change in the US political landscape is not a good omen for progress on IMF reforms," said Eswar Prasad, a former IMF official.</p>
<p>Since 2012, the Obama administration has sought to convince Republicans in Congress to formally endorse the reform -- decided in 2010 with US support -- that doubles its financial resources and increases slightly the voting power in the IMF of emerging economies like China, Russia and Brazil.</p>
<p>As the largest shareholder, the US endorsement is necessary to implement the reforms. All other major economies have ratified them already.</p>
<p>But the White House has repeatedly failed to get the ratification through Congress, against opposition from Republicans.</p>
<p>Some Republicans have said specifically they do not want to increase the influence of China and Russia in the Fund -- even though the US would remain the dominant IMF power after the reforms.</p>
<p>That leaves the emerging economies increasingly impatient. China, the world's second largest economy, only holds 4 percent of the voting rights, barely more than Italy, whose economy is one-fifth the size.</p>
<p>In reaction, in July Brazil, Russia, India, China and South Africa joined hands to create their own monetary fund for emergency needs.</p>
<p>They could take the opportunity at the coming G20 summit in Australia this month to pound the table over the issue, according to the Russian representative Svetlana Lukash.</p>
<p>"The most important thing for us is the reform of the IMF, a problem which has not yet been solved within the framework of the G20," she said Friday.</p>
<h2>&nbsp;- Plan B -</h2>
<p>&nbsp;The IMF, which declined to talk about the issue, is itself anxious. Already under attack over its legitimacy, it has to work with more limited resources as it awaits US action.</p>
<p>"The lack of approval will result in the weakening of the IMF as the main anchor of the international monetary system," said Domenico Lombardi, former advisor to the IMF board.</p>
<p>If the reform is not adopted by the end of this year, the Fund is to present a "Plan B" to its board, the specifics of which remain vague. That then would require new negotiations among its 188 member-states.</p>
<p>Some experts say the Fund should press for US ratification by the end of this year, while the current Congress remains in office and before the new one sits in January.</p>
<p>"The advantage is that it's not a new issue," said Ted Truman, former Treasury official.</p>
<p>"The current Republican representatives are now better informed about the IMF legislation. I'm not saying that they're perfectly informed, but they're better informed."</p>
<p>Douglas Rediker, a former US representative to the IMF board, said the opposition in Congress has mainly been part of "internal domestic political maneuvers that have little to nothing to do with the IMF reform itself".</p>
<p>"It's going to take a collaborative effort between the White House, the Senate, and the House to actually work together to understand how important this is."</p>
<p>To make that happen, Lagarde could very well have to gear up her belly dance.</p>
<p>&nbsp;</p><p><a href="http://www.businessinsider.com/afp-imf-reforms-threatened-by-republican-electoral-sweep-2014-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/r-imf-warns-global-economy-at-risk-calls-for-bold-action-2014-10The IMF Just Talked It Over — And They're Worried About The Global Economyhttp://www.businessinsider.com/r-imf-warns-global-economy-at-risk-calls-for-bold-action-2014-10
Sat, 11 Oct 2014 14:48:00 -0400By David Brunnstrom and Leika Kihara
<p><img src="http://static1.businessinsider.com/image/54396f175afbd3a6338b4567-800-/imf-warns-global-economy-at-risk-calls-for-bold-action.jpg" border="0" alt="A general view shows the International Monetary and Financial Committee (IMFC) before their meeting at the World Bank/IMF annual meetings in Washington October 11, 2014. REUTERS/Joshua Roberts " width="800"></p><p></p>
<p>WASHINGTON (Reuters) - The International Monetary Fund's member countries on Saturday said bold action was needed to bolster the global economic recovery, and they urged governments to take care not to squelch growth by tightening budgets too drastically.</p>
<p>With Japan's economy floundering, the euro zone at risk of recession and the U.S. recovery too weak to generate a rise in incomes, the IMF's steering committee said focusing on growth was the priority.</p>
<p>"A number of countries face the prospect of low or slowing growth, with unemployment remaining unacceptably high," the International Monetary and Financial Committee said on behalf of the Fund's 188 member countries.</p>
<p>The Fund this week cut its 2014 global growth forecast to 3.3 percent from 3.4 percent, the third reduction this year as the prospects for a sustainable recovery from the 2007-2009 global financial crisis have ebbed, despite hefty injections of cash by the world's central banks.</p>
<p>The IMF has flagged Europe's weakness as the top concern, a sentiment echoed by many policymakers, economists and investors gathered in Washington for the Fund's fall meetings, which wrap up on Sunday.</p>
<p>European officials have sought to dispel the gloom, with European Central Bank President Mario Draghi on Saturday talking about a delay, not an end, to the region's recovery.</p>
<p>But efforts to provide more room for France to meet its European Union deficit target looked set to founder on Germany's insistence that the agreement on fiscal rectitude was set in stone.</p>
<p>The IMF panel urged countries to carry out politically tough reforms to labor markets and social security to free up government money to invest in infrastructure to create jobs and lift growth.</p>
<p>It called on central banks to be careful when communicating changes in policy in order to avoid financial market shocks. While not naming any central banks, the warning appeared aimed at the U.S. Federal Reserve, which will end its quantitative easing policy this month and appears poised to begin raising interest rates around the middle of next year.</p>
<p>The Fed has debated a change to its commitment to holding rates near zero for a "considerable time" at its recent policy meetings, but is stepping gingerly to avoid roiling financial markets. It wants to avoid a repeat of the "taper tantrum" it touched off last year when it signaled its easing of monetary policy was drawing to a close.</p>
<p>&nbsp;</p>
<p>(Writing by David Chance; Editing by Tim Ahmann)</p><p><a href="http://www.businessinsider.com/r-imf-warns-global-economy-at-risk-calls-for-bold-action-2014-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-imf-is-calling-for-state-guarantees-for-bank-lending-2014-10The IMF Wants To Put Taxpayers On The Hook For New Bank Loans In Europehttp://www.businessinsider.com/the-imf-is-calling-for-state-guarantees-for-bank-lending-2014-10
Wed, 08 Oct 2014 10:03:00 -0400Tomas Hirst
<p><img style="float:right;" src="http://static6.businessinsider.com/image/543538ad69bedd153106f091-1200-924/lehman-brothers-9.jpg" border="0" alt="lehman brothers"></p><p>The IMF has called on European governments to guarantee bank lending to companies in order to support the region's economic recovery.</p>
<p>The plan would put taxpayers on the hook for loans that go bad, loans that banks are either unable to make currently or are too risky to make.</p>
<p>In its <a href="http://www.imf.org/external/pubs/ft/gfsr/2014/02/index.htm">Global Financial Stability Report released Wednesday</a> the Fund says over six years since Lehman Brothers failed, banks accounting for 40% of total assets held in all banks globally — a number that's in the trillions of dollars — are still unable to provide enough credit to the global economy to support a recovery.</p>
<p>Bank loans allow companies to invest in new technology, take on more staff or purchase competitors in order to grow their businesses and help boost the economy more generally. Small firms in particular rely on bank lending as they are too small to access bond markets, where larger firms have been able to get access to a plentiful supply of cheap funds.</p>
<p><span>The problems are particularly concentrated in Europe.&nbsp;</span><span>The report finds that whereas the US has already seen a substantial improvement in the amount of bank lending, "</span><span>real credit growth is already lagging behind the average&nbsp;</span><span>recovery path in past banking crises in the euro area and&nbsp;</span><span>the United Kingdom."</span></p>
<p><span>These concerns have already prompted the&nbsp;<a href="http://www.businessinsider.com/footnote-shows-germany-caved-in-opposition-to-ecb-asset-purchases-2014-10">European Central Bank (ECB) to announce a plan to buy private sector assets from Europe's banks</a>, giving those banks more cash to boost lending across the region. However, the IMF offers an interesting addition to improve the effectiveness of their plan —&nbsp;<strong>governments could directly or indirectly guarantee lending</strong>. The report says:</span></p>
<p style="padding-left: 30px;">Targeted fiscal support (guarantees by pan-European agencies) would further encourage this type of market-based funding.</p>
<p><span style="line-height: 1.5em;">What this means is that bank lending across Europe in the aftermath of the Great Recession has fallen significantly behind where is has been at similar stages in past financial crises. I<span>n order for Europe to recover, its banks are going to have to change their business models in favour of lending to people and businesses rather than investing money in stocks and bonds.<br></span></span></p>
<p><span style="line-height: 1.5em;"><span>Unfortunately, the countries most in need of these funds in the vulnerable Euro Area are those that are still plagued by high unemployment, distressed loans (where the borrowers are struggling to meet repayments or are already behind on them) and government spending cuts. This creates an uncertain environment into which banks have proven unwilling to lend.<br></span></span></p>
<p><span style="line-height: 1.5em;"><span>So, as the chart below shows, lending to countries like Greece has been contracting sharply:</span></span></p>
<p><span style="line-height: 1.5em;"><img src="http://static5.businessinsider.com/image/543534866bb3f7226806f08a-985-718/screen shot 2014-10-08 at 13.52.30.png" border="0" alt="IMF Bank lending"><br></span></p>
<p>In his opening remarks José Viñals, director of the monetary and capital markets department&nbsp;at the IMF, said:</p>
<p style="padding-left: 30px;">The good news is that banks are much safer now, having increased their capital levels and liquidity. However, this GFSR finds that&nbsp;<strong>many banks do not have the financial muscle to provide enough credit to vigorously support the recovery</strong>.</p>
<p><span style="line-height: 1.5em;">The IMF is in effect asking European governments to issue taxpayer guarantees in order to overcome the banks' reluctance to lend to vulnerable states. This is unlikely to please German policymakers who have been </span><span style="line-height: 1.5em;"></span><a href="http://blogs.wsj.com/economics/2014/10/07/qa-with-german-bundesbank-president-jens-weidmann/">campaigning vigorously to avoid German taxpayers having to shoulder more responsibility</a><span style="line-height: 1.5em;"> for the future of the euro.</span></p>
<p><span style="line-height: 1.5em;">The IMF's message to them is this — you may not have a choice.</span></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/footnote-shows-germany-caved-in-opposition-to-ecb-asset-purchases-2014-10" >Here's The Hidden Footnote That Shows Germany Caved In Its Opposition To Europe's €1 Trillion Rescue Plan</a></strong></p>
<p><a href="http://www.businessinsider.com/the-imf-is-calling-for-state-guarantees-for-bank-lending-2014-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/economic-effects-of-africa-ebola-outbreak-2014-10Here Are The Economic Effects Of The Worsening Africa Ebola Outbreakhttp://www.businessinsider.com/economic-effects-of-africa-ebola-outbreak-2014-10
Thu, 02 Oct 2014 11:06:00 -0400Amadou Sy & Amy Copley
<p><img style="float:right;" src="http://static2.businessinsider.com/image/54256e6aeab8ea0b4914fcb6-1200-800/rtr47qfb.jpg" border="0" alt="ebola child Abidjan cote d'ivoire sign"></p><p>Since March 2014,&nbsp;<a href="http://online.wsj.com/articles/ebola-virus-has-killed-more-than-3-000-people-says-who-1411894026">over 3,000 people have died</a>&nbsp;from the relentless spread of the Ebola virus throughout the West African countries of Guinea, Sierra Leone, Liberia and Nigeria.</p>
<p>Despite&nbsp;<a href="http://www.bostonglobe.com/opinion/2014/09/23/responding-ebola-countries-need-staff-stuff-space-and-systems/ugSFKkOw9S7Ser0p8PGeOK/story.html">the heroic efforts</a>&nbsp;of the humanitarian and medical professionals in these countries, crumbling public health systems—which were&nbsp;<a href="http://www.huffingtonpost.com/samuel-a-worthington/ebola-a-fragile-healthcar_b_5871080.html">notoriously weak even before the current outbreak</a>&nbsp;began—and a&nbsp;<a href="http://www.nation.co.ke/news/africa/Liberia-overrun-Ebola-wards-/-/1066/2468168/-/xqckow/-/index.html">lack of facilities, equipment and medical staff</a>&nbsp;have tragically not been able to stem the tide in these countries. Distrust of the government—fueled by decades of civil war—has also prompted&nbsp;<a href="http://www.washingtonpost.com/news/to-your-health/wp/2014/09/19/the-fear-and-hopelessness-behind-the-deadly-attack-on-ebola-workers-in-guinea/">attacks on health workers</a>&nbsp;by&nbsp;<a href="http://www.npr.org/blogs/goatsandsoda/2014/09/28/351845664/the-experts-missing-from-the-ebola-response-anthropologists">fearful groups</a>, further undercutting crucial&nbsp;<a href="http://allafrica.com/stories/201409251566.html">outreach and educational interventions</a>&nbsp;aimed at sensitizing communities to the virus and breaking the chain of transmission.</p>
<p>Before the Ebola outbreak intensified, these countries were making remarkable economic progress—particularly Sierra Leone and&nbsp;<a href="http://www.bloomberg.com/news/2014-08-04/liberia-says-ebola-threatens-to-erase-progress-since-civil-war.html">Liberia</a>, which experienced rapid economic growth in recent years after overcoming&nbsp;<a href="http://www.economist.com/news/special-report/21572378-why-fighting-across-much-continent-has-died-down-recent-years-tired-war">decades of civil strife</a>. In 2013, Sierra Leone and Liberia ranked second and sixth among&nbsp;<a href="http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?order=wbapi_data_value_2013+wbapi_data_value+wbapi_data_value-last&amp;sort=desc">the top 10 countries with the highest GDP growth</a>&nbsp;in the world (albeit their base levels of GDP are very small to begin with).</p>
<p>Guinea, while growing more slowly at 2.5 percent in 2013,&nbsp;<a href="http://af.reuters.com/article/guineaNews/idAFL5N0R52PM20140904">had high expectations</a>&nbsp;for growth resting on its&nbsp;<a href="https://uk.finance.yahoo.com/news/miners-step-safeguards-mineral-rich-064659211.html">Simandou iron ore project</a>, on to which international investors&nbsp;<a href="http://ifcext.ifc.org/ifcext/spiwebsite1.nsf/ProjectDisplay/SPI_DP31067">Chinalco, Rio Tinto, and the International Finance C</a>orporation&nbsp;have signed.&nbsp;However, the iron mining sectors in these countries have been hit both by&nbsp;<a href="http://www.miningweekly.com/article/smacked-by-ebola-low-prices-west-africa-iron-mining-faces-reshape-2014-09-30">declining prices and the Ebola outbreak</a>, calling into question the expected profitability of these projects, hurting investor confidence in the region and hindering contributions to future growth.</p>
<p>At the beginning of the year, the International Monetary Fund forecasted that GDP growth in 2014&nbsp;<a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/09/17/000470435_20140917071539/Rendered/PDF/907480REVISED.pdf">would amount to 11.3 percent, 5.9 percent and 4.5 percent</a>&nbsp;for Sierra Leone, Liberia and Guinea, respectively. In mid-August, as a result of these factors, the IMF revised these estimates to 8.0 percent, 2.5 percent and 2.4 percent, accordingly.</p>
<h2>Economic Effects of the Outbreak</h2>
<p>In addition to the enormous and tragic loss of human life, the Ebola epidemic is having devastating effects on these West African economies in a variety of essential sectors by halting trade, hurting agriculture and scaring investors.</p>
<p>Mobility restrictions, trade and transport: To halt the spread of the virus, the countries most affected by Ebola have implemented quarantines in areas where risk of infection is high while neighboring countries such as Cote d’Ivoire and Senegal have imposed restrictions on the movement of people and goods, including border closures. These measures, in turn, have reduced internal and regional trade, transport and, of course, tourism.</p>
<p>But since official trade statistics do not capture informal trade—including cross-border trade which could&nbsp;<a href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Economic%20Brief%20-%20Informal%20Cross%20Border%20Trade%20in%20Africa%20Implications%20and%20Policy%20Recommendations%20-%20Volume%203.pdf">range from 20 to 75 percent of GDP</a>&nbsp;for West African countries—the estimated impact proposed by the World Bank may overlook the large reduction in informal trade due to mobility constraints. While these actions aim to break the chain of transmission, the president of Sierra Leone has called them an “<a href="http://www.bloomberg.com/news/2014-09-14/sierra-leone-says-ebola-embargo-saps-revenue-hampers-growth.html">economic blockade</a>” that has resulted in scaled-back production and revenues for the government.</p>
<p><img class="float_left" src="http://static4.businessinsider.com/image/542d67a7eab8ea5439c5ed7a-1200-858/sierra leone commissioner ebola.jpg" border="0" alt="Sierra Leone Commissioner Ebola">Agriculture:&nbsp;According to the Food and Agriculture Organization (FAO), agriculture accounts for 57 percent of Sierra Leone’s GDP, 39 percent of Liberia’s, 20 percent of Guinea’s, and 22 percent of Nigeria’s.&nbsp;Disruptions from the outbreak during the planting season earlier this year are expected to diminish yields for the staple crops of rice and maize during the harvest season, between October and December.</p>
<p>Already, the price of the staple crop cassava in some places in Liberia&nbsp;<a href="http://www.voanews.com/content/ebola-claims-another-victim-economic-growth/2434979.html">has more than doubled</a>&nbsp;(increased by 150 percent) according to the FAO. Food price shocks such as these will likely lead to inflation: According to IMF estimates,&nbsp;<a href="http://www.washingtonpost.com/news/morning-mix/wp/2014/09/30/hit-by-ebola-liberia-is-descending-into-economic-hell/">in Liberia the inflation rate will climb</a>&nbsp;to 13.1 percent in 2014 from 7.7 percent before the Ebola crisis first broke.</p>
<p>Mining and investment: Mining activity (which constitutes 14 percent of Liberia’s economy and approximately 17 percent of Sierra Leone’s) is decreasing in Liberia and Sierra Leone following restrictions on non-essential travel and repatriation of personnel.&nbsp;<a href="http://www.voanews.com/content/ebola-claims-another-victim-economic-growth/2434979.html">Voice of America reports</a>&nbsp;that investor confidence has dropped since the escalation of Ebola cases. China Union and Arcelor Mittal are scaling down iron ore mining operations in Liberia. Some miners in Sierra Leone and Liberia are afraid to enter high-risk districts, and several firms (including Australian mining firm Tawana Resources and Canadian Oversea Petroleum) have suspended operations or sent foreign workers home. Investments may be postponed and even cancelled if the perceived risks are too great. Guinea, for now, is not experiencing a major impact on its mining sector since its main mines are not located in the areas where there is a high risk of infection.</p>
<p>Fiscal challenges: Fiscal revenues will decline as limited economic activity reduces revenues from taxes, tariffs and customs duties. At the same time, to resolve the crisis and meet the greater health and security needs of their people, government expenditures will need to rise. Avoiding the impact on the poorest and most vulnerable will also necessitate more transfers. As seen in Figure 1, the World Bank reports that “short-term fiscal impacts are also large, at $93 million for Liberia (4.7 percent of GDP); $79 million for Sierra Leone (1.8 percent of GDP); and $120 million for Guinea (1.8 percent of GDP).”</p>
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<p>The financial sector: Although the financial sector has largely been excluded from the narrative of the outbreak, it is worth noting that if large depositors withdraw funds, banks may face serious liquidity problems. Also, if some big creditors miss payments, the number of nonperforming loans will increase, eventually leading to some defaults. So liquidity management must also be a priority and banks’ bad loans portfolio need to be monitored carefully.</p>
<p>Ultimately, loss of confidence in the financial system is the main risk factor and should be avoided. Finally, capital flight is an additional risk to the financial system especially as exchange rates have become more volatile. The&nbsp;<a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/09/17/000470435_20140917071539/Rendered/PDF/907480REVISED.pdf">World Bank report</a>s&nbsp;that many wealthier Guineans and expatriates have already left the country and that uncertainty and risk aversion in Sierra Leone has prompted a rise in capital outflows.</p>
<p>Tourism:&nbsp;Airlines such as British Airways, Emirates, Air France, Asky Airlines and Arik Air have implemented some bans on flights to and from the most affected countries. The African Union has asked for these bans to be lifted and also for proper screening mechanisms to be put in place at airports. CEOs of 11 firms operating in West Africa have said that&nbsp;<a href="http://news.yahoo.com/african-union-calls-ebola-travel-bans-lifted-163924718.html">some measures, including these travel restrictions, are doing more harm than good</a>&nbsp;and may well be contributing to the humanitarian crisis by blocking crucial trade flows, thereby pushing up the prices of essential foods and medicines.</p>
<p>There are also some concerns that an indirect consequence of the Ebola outbreak will be&nbsp;<a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11119088/What-is-the-impact-of-Ebola-on-west-Africas-tourism.html">diminished tourism throughout the African continent</a>: As seen in&nbsp;<a href="http://www.brookings.edu/blogs/africa-in-focus/posts/2014/08/19-us-africa-summit-media-coverage-sy">another recent&nbsp;Africa in Focus</a>&nbsp;blog, the Ebola outbreak has been dominating headlines in the U.S., African and international press since early August, even overshadowing the Africa Leaders Summit. Misconceptions about the transmission of Ebola and the risk of travel in Africa&nbsp;<a href="http://news.yahoo.com/rampant-ebola-fear-takes-toll-africa-tourism-143322441.html">may further reduce tourism</a>&nbsp;to and within the continent.</p>
<h2>Fear of Contagion Curbs Economic Activity</h2>
<p>What is striking about the Ebola outbreak’s effects on the economies of West Africa is that the&nbsp;<a href="http://www.newyorker.com/news/daily-comment/ebola-cost-fear">most influential factor constraining economic activity there is fear</a>. As stressed by the World Bank, “the largest economic effects of the crisis are not as a result of the direct costs (mortality, morbidity, caregiving, and associated losses to working days) but rather those resulting from&nbsp;<a href="http://www.worldbank.org/en/news/press-release/2014/09/17/ebola-economic-impact-serious-catastrophic-swift-response-countries-international-community-world-bank">aversion behavior driven by fear of contagion</a>.</p>
<p>This in turn leads to a fear of association with others and reduces labor force participation, closes places of employment, disrupts transportation, and motivates some government and private decision-makers to close sea ports and airports.” The World Bank also notes that behavioral effects were responsible for as much as 80 to 90 percent of the total economic impact of the severe acute respiratory syndrome (SARS) epidemic of 2002-2004 and the H1N1 flu epidemic of 2009.</p>
<p>As the current epidemic continues to unfold, the World Bank estimates that economic activity could be drastically affected in both the short and medium term, depending on whether the outbreak is swiftly contained (a “Low Ebola” scenario) or the outbreak continues to spread apace (a “High Ebola” scenario) (Figure 2).&nbsp;</p>
<p style="font-style: normal; font-variant: normal; font-weight: normal; font-size: 15px; line-height: 24px; font-family: Arial, Helvetica, sans-serif; margin: 0px 0px 26px; color: #343434; letter-spacing: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-align: center; background-color: #ffffff;"><img src="http://www.brookings.edu/~/media/Research/Files/Blogs/2014/10/01%20ebola%20outbreak%20sy%20copley/ebola%20outbreak%20in%20the%20short%20term.jpg" border="0" alt="" width="581" height="519" style="border: 0px; vertical-align: middle;"></p>
<h2>A Collective Response to a Global Threat</h2>
<p>The U.S. Centers for Disease Control (CDC) recently predicted that if the virus continues to spread at current rates,&nbsp;<a href="http://www.cdc.gov/mmwr/preview/mmwrhtml/su6303a1.htm?s_cid=su6303a1_w">more than 1.4 million people will be infected</a>&nbsp;before the outbreak is contained.&nbsp; But this prediction is a worst-case scenario that does not take into account recent efforts by the international community to stem the spread of the disease. It is, however, a stark reminder of the possible exponential transmission rate of the disease if the collective response to the Ebola threat is not fast and effective.</p>
<p>The U.N. has stated that&nbsp;<a href="http://news.yahoo.com/un-says-1-0-billion-needed-fight-ebola-005314046.html">$1 billion is needed to contain the Ebola outbreak</a>, while the World Bank has estimated that containment and mitigation would require several billion dollars for humanitarian support, fiscal support, screening facilities at airports and seaports, and for strengthening the surveillance, detection and treatment capacity of health systems.</p>
<p>The CDC has also emphasized the importance of building new medical facilities, improving home care treatment (including training thousands of health care workers), and implementing broad-based, effective public information campaigns. Although the CDC projected a sobering, worst-case scenario of 1.4 million cases of Ebola by January 2015 (from the 6,000 cases at the moment), it did not take into account the planned interventions by the international community—and recently, commitments to intervene have been made on a large scale.</p>
<p>International donors such as the World Bank and IMF have pledged to provide over&nbsp;<a href="http://www.worldbank.org/en/news/press-release/2014/09/25/world-bank-group-nearly-double-funding-ebola-crisis-400-million">$400 million</a>&nbsp;and&nbsp;<a href="http://www.imf.org/external/pubs/ft/survey/so/2014/new092614a.htm">$130 million</a>&nbsp;in financing (respectively) toward emergency response and medium- and long-term recovery in the most-affected countries. The&nbsp;<a href="http://www.voanews.com/content/us-troops-help-liberia-combat-ebola-/2465887.html">U.S. has provided a surge of $175 million and 3,000 troops</a>&nbsp;to help train nurses and establish emergency treatment facilities in Liberia.&nbsp;<a href="http://www.bloombergview.com/articles/2014-09-16/africa-s-ebola-should-be-china-s-problem">China has committed</a>&nbsp;174 doctors to Sierra Leone and $37 million in assistance to West Africa. Cuba has also pledged to&nbsp;<a href="http://news.yahoo.com/cuba-sending-300-more-doctors-nurses-fight-ebola-073620856.html">provide the largest team of medical professionals</a>&nbsp;of any country to assist the region, with 165 doctors set to arrive in Sierra Leone in October and an additional 296 heading to Guinea and Liberia.</p>
<p>African countries have made contributions in the fight against Ebola as well; for example, under the U.N. Mission for Emergency Ebola Response,&nbsp;<a href="http://www.gbcghana.com/1.1851047">Ghana will serve as a logistical and training hub</a>&nbsp;for medical professionals in the region. Senegal is also helping set up an “air corridor” to facilitate the transportation of medical personnel to Ghana.</p>
<p>Through the African Union Ebola Outbreak in West Africa (ASEOWA) mission, Uganda—a country that has dealt with Ebola crises in the past—has pledged 25 medical experts to advise regional efforts, as has the Democratic Republic of the Congo.</p>
<p>The&nbsp;<a href="http://www.dakaractu.com/PREVENTION-EBOLA-la-commission-de-l-Uemoa-degage-une-enveloppe-de-480-millions-de-FCfa-pour-les-etats-membres_a75452.html">West African Economic and Monetary Union (WAEMU) has given approximately $1 million</a>&nbsp;to reinforce preventative measures aimed at stemming the spread of Ebola throughout West Africa. In addition,&nbsp;<a href="http://www.bdlive.co.za/africa/africannews/2014/09/29/ebola-spread-beats-worlds-response">South Africa has established an Ebola diagnostics lab</a>&nbsp;in Sierra Leone. While these commitments from international and regional donors show great promise to mitigate this crisis,&nbsp;<a href="http://www.businessweek.com/articles/2014-09-24/ebola-drug-zmapps-development-delayed-by-pentagon-agency">only about one-third of the total $988 million</a>&nbsp;requested by the U.N. has been pledged as of September 24, 2014.</p>
<p>Nevertheless, the considerable support from African countries and institutions, as well as the international community, highlights the growing recognition that Ebola is not a West African problem. It is not an African problem.&nbsp;It is a global problem&nbsp;that needs to be addressed at all levels (national, regional and international) as swiftly and completely as possible.</p>
<p>In this sense, it is important to coordinate a united African and global response in the short term, but also consider how to integrate investment in health systems into regional development plans in the medium to long term so that public health crises like the current Ebola outbreak can be addressed more quickly (or averted entirely) in the future. The good news is that the people of Guinea, Liberia and Sierra Leone are resilient and have surmounted terrible civil strife before, managing to establish new heights of political and macroeconomic stability in recent years. The same strength that allowed them to endure and rebuild from past devastating conflicts, in conjunction with international support, will help them overcome the Ebola outbreak now.</p><p><a href="http://www.businessinsider.com/economic-effects-of-africa-ebola-outbreak-2014-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/r-imf-warns-of-risks-from-excessive-financial-market-bets-2014-9IMF WARNS: Investors Are Taking 'Excessive' Risks In The Marketshttp://www.businessinsider.com/r-imf-warns-of-risks-from-excessive-financial-market-bets-2014-9
Wed, 17 Sep 2014 19:28:00 -0400Jason Lange
<p><img style="float:right;" src="http://static3.businessinsider.com/image/5419e9b05afbd3022c8b4567-541-380/imf-warns-of-risks-from-excessive-financial-market-bets-2014-9.jpg" alt="The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. REUTERS/Yuri Gripas (UNITED STATES - Tags: POLITICS BUSINESS) - RTXYQYK" border="0" height="380" width="541"></p><p>WASHINGTON (Reuters) - The global economy faces a growing risk from big financial market bets that could quickly unravel if investors get spooked by geopolitical tensions or a shift in U.S. interest rate policy, the International Monetary Fund said on Wednesday.</p>
<p>The IMF, an institution based in Washington that is the world's premier watchdog for financial and economic stability, said in a report it still expects economic growth will pick up in the second half of 2014 after a rough start to the year.</p>
<p>But it also warned that financial market indicators suggested investor bets funded with borrowed money looked "excessive" and that markets could quickly deflate if there were surprises in U.S. monetary policy or the conflicts in Ukraine and the Middle East.</p>
<p>As the IMF put it in its technical language, "New downside risks associated with geopolitical tensions and increasing risk taking are arising."</p>
<p>The IMF prepared its report for the Group of 20 meeting of finance ministers and central bankers in Australia this weekend, and just before the U.S. Federal Reserve's regular meeting on Wednesday.</p>
<p>The U.S. central bank renewed its pledge to keep interest rates near zero for a "considerable time" and repeated concerns over slack in the labor market. But some Fed officials have stated publicly that the central bank should be ready to move rates up sooner and faster than financial markets expect given the spate of mostly good news on the U.S. economy.</p>
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<p>(Reporting by Jason Lange; Editing by Chizu Nomiyama)</p><p><a href="http://www.businessinsider.com/r-imf-warns-of-risks-from-excessive-financial-market-bets-2014-9#comments">Join the conversation about this story &#187;</a></p>